(Bloomberg) -- OAO Gazprom, the world’s largest natural-gas producer, won its last permit to build a $10-billion pipeline to Germany, its first link to western Europe that avoids transit countries blamed for previous supply disruptions.
A Finnish regional agency today approved Nord Stream AG’s construction of the pipeline under the Baltic Sea, the final regulatory hurdle for the venture with BASF AG’s Wintershall AG unit, E.ON Ruhrgas AG and Nederlandse Gasunie NV. Zug, Switzerland-based Nord Stream AG earlier secured other permits from Finland, Russia, Germany, Sweden and Denmark.
Baltic Sea countries voiced concern over the pipeline’s environmental impact while Poland, which transfers about a fifth of Russia’s gas to Europe, has compared it to the Molotov-Ribbentrop Pact that divided Europe before World War II. The 7.4 billion-euro ($10 billion) link would bypass Ukraine, reducing the risk of cutoffs that have affected European supplies.
“In general, approvals and discussions were objective although excessively politicized,” Alexei Knizhnikov, an oil and gas program coordinator at WWF Russia, said in an e-mail. “The process that has just been completed doesn’t remove all potential threats and issues at the implementation stage.”
Baltic Sea littoral countries have said the 1,220- kilometer (758-mile) pipeline may cause environmental damage. Nord Stream has changed the proposed path to allay these concerns, moving the route north of the Danish island of Bornholm, and further from nature reserves near the Swedish island of Gotland.
‘Some Doubts’
“We still have some doubts” over the project’s impact on the environment, Estonia’s Prime Minister Andrus Ansip said Feb. 10. “The concerns of Estonian scientists have not been adequately answered.”
More than 150,000 mines were deployed and disposed of in the Baltic Sea during and after the two World Wars, according to Nord Stream. The company plans to bypass the munitions in some locations or remove them in others.
“It’s the biggest man-made construct in the Baltic Sea,” said Tapani Veistola, officer at the Finnish Association for Nature Conservation. “The main problems are the nutrients and heavy metals spread during construction and that there is no plan for dealing with the pipeline after it’s no longer in use.”
Nord Stream will build two parallel pipelines on the Baltic seabed from the Russian city of Vyborg near the Finnish border to Greifswald on the Baltic coast in Germany. The conduit’s first line is due to start operating in 2011, delivering 27.5 billion cubic meters a year, or about a third of Germany’s consumption. The second pipe is to double capacity in 2012.
On Time, Within Budget
“This is an important decision for European environment and the security of energy supply,” Sebastian Sass, Nord Stream’s permitting manager, said in a telephone interview before the permit decision. The project is on time and within budget with construction set to start in April, Sass said.
Today’s permit was the third and final hurdle for Nord Stream in Finland after an environment report found the project feasible and the government sanctioned the use of Finland’s economic zone.
The Southern Finland Regional State Administrative Agency in Helsinki granted the permit today, it said in an e-mailed statement.
Gazprom and Europe
Gazprom aims to expand its share of the European gas market from about 25 percent now to 30 percent in 2015. The company’s export arm has contracted 22 billion cubic meters of gas deliveries via the line, Nord Stream Finance Director Paul Corcoran said in an interview in December.
The European Union has sought more reliable imports of gas after shipments through Ukraine were halted twice over the last four years. A row between Ukraine and Russia over gas prices and transit fees disrupted Gazprom’s supplies to 20 European countries for almost two weeks in freezing temperatures in January 2009.
Ukraine’s President-elect Viktor Yanukovych has vowed to maintain transit volumes via his country, currently the main route for Russian gas to Europe, and said Ukraine should join Nord Stream.
“If I win the elections, I will propose that Ukraine joins the consortium that is now constructing Nord Stream,” he said on Jan. 19, ahead of the second-round election where he claimed victory.
Gazprom holds a 51 percent stake in Nord Stream, Wintershall Holding AG and E.ON Ruhrgas each have 20 percent and Nederlandse Gasunie NV has 9 percent. GDF Suez SA, owner of Europe’s biggest gas network, has been in talks on joining the project. Nord Stream expects to borrow 3.9 billion euros from 27 banks in early 2010 to finance construction, Corcoran said.
Molotov-Ribbentrop
Polish Foreign Minister Radoslaw Sikorski, while serving as defense minister in an earlier government, in 2006 compared the Nord Stream project to the Molotov- Ribbentrop treaty that divided eastern Europe between Nazi Germany and the Soviet Union before World War II.
The pipeline may be preferable to tankers for fuel supply, Finland’s Veistola said.
“The Gulf of Finland is already full of ship traffic,” he said. “We’re living on borrowed time as statistically speaking, there should already have been a major oil or chemical spill.”
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